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eBooks: Inside the Industry

Everything you ever wanted to know about eBooks but were afraid to ask.

Why so serious?

Libraries are upset. But why are they upset? Let's set aside that libraries and publishers are both in the business of supporting readers. Let's also set aside the role libraries play in growing readers, promoting books and authors, connecting readers with books and authors they choose to purchase later, as well as providing to those who do not have the resources to purchase all the books that they might want to access to all the books and authors as possible. Libraries are upset because this does not make sense from a numbers perspective.


The Setup

Let's look at how Macmillan's new purchasing restrictions play out for public libraries and consumers. We'll use a Macmillan title because Macmillan is the only one of the Big 5 publishers to embargo books, but it's important to note that all of the Big 5 publishers use the metered access purchase model. Also important is that purchase of eMaterials is actually purchase of a license to use the materials for a specified time; the buyer does not own eMaterials the way they own print books. Even so, the term copies will be used in this example for clarity.
On November 5th, 2018, Macmillan released the eBook Nine Perfect Strangers by Liane Moriarty. The library eBook price was $60.00 for 24 months or 52 checkouts, whichever happened first. Note: for the purposes of this exercise, all underlying assumptions from the source are taken at face value.


The Hook

If Nine Perfect Strangers had been released this November instead of last, it would have been embargoed 8 weeks, during which time Fairfax County Public Library would have been allowed to purchase only a single copy. With a checkout period of 3 weeks, that would allow 2.7 checkouts during the embargo period -- which we'll call 3. Instead, the library was able to purchase 67 copies within the first week, resulting in at least 180 checkouts over the same time period.

Under embargo 3 customers can be served; with no embargo, 180 customers were served.

Macmillan's rationale for initiating an embargo was "to address their growing fears that library lending was cannibalizing sales," so they ran a test. Their conclusion: "Given the choice between a purchase of an eBook for $12.99 or a frictionless lend for free, the American eBook reader is starting to lean heavily toward free." Free to them, in this case. Speaking to the Chief Officers of State Library Agencies, Macmillan CEO Sargent noted "based on anecdotal data, they [Macmillan] believe that if library users cannot gain access to a new eBook from their library, 8 percent of those waiting will likely buy the eBook."

Okay, we'll bite. Let's do the math.


The Shut out

Libraries try to meet demand as best they can within budgetary constraints. Fairfax County Public Library (FCPL) purchased 67 copies of Nine Perfect Strangers in the first week of release in response to demand -- the holds list. In this case, 400 customers waited for the eBook. If 8 percent of those 400 people in line (32 people) decided not to wait and instead purchased the Kindle version, then Macmillan would have given up 66 sales to a library for 32 retail sales. Remember, the new purchase model restricts libraries to buying only one copy in the first 8 weeks. Not just that, the prices for libraries are much higher: $60.00 versus $12.99. Using their own rationale, Macmillan would have given up $3,600 in library sales for $415 in likely sales -- for just FCPL. Even using the reduced embargoed price of $40.00, Macmillan would have given up over $2,200. This does not make sense.

By their own logic, Macmillan is leaving money on the table.


The Sting

  • The math works only if libraries continue to purchase as they normally would, but now with a multi-month delay after the embargo period completes.
  • Metered access copies must be repurchased every two years or disappear from the collection.
  • All publishers moved to the metered access model in the last year. What if they, too, determine to embargo?
  • The metered access model is unsustainable for libraries for anything other than a temporary "new releases" collection. Libraries cannot afford to repurchase their eBook collections every two years.
  • Want to donate your eBook to the collection? That's not possible. EBook purchases are licenses and there is no right of first sale , no federal law protecting their sale to libraries, as there is with print.

Thanks to @kidsilkhaze (Jennifer R at Arlington Public Library in VA) for her Tweetstorm that formed the basis of this example.

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